Report: DMCA could be allowing up to $1 billion in royalty underpayments

The Digital Millennium Copyright Act has been a lightning rod for criticism from the music industry, particularly from performers and labels over its safe harbor exemptions. These rules allow content hosting websites to avoid royalty or licensing fees based on content uploaded by users. There have been many calls to update the act, which took effect in 1999, to reflect the changes that have happened in the music industry over the past two decades. The most recent ammunition in the arsenal for those activists is an academic report from the Phoenix Center.

The study used economic modeling to examine how potential royalty rate changes would impact YouTube’s business. It’s a dense report, but the takeaway is just how large a chunk of revenue could be going to the music industry. “Using 2015 data, we find that that a plausible royalty rate increase could produce increased royalty revenues in the U.S. of $650 million to over one billion dollars a year,” the investigators said.

Even as reports point to the positive growth contributed by subscription streaming, the revenue generated by ad-supported services such as YouTube have been rising at a much slower rate. Fittingly, this study dropped at the same time as the latest RIAA figures, which demonstrate that trend. RIAA CEO Cary Sherman took the data unveiling as an opportunity to question the royalty rates paid by YouTube and other such user-generated content platforms.

Given the interest in this subject, it seems likely that there will be continued pushback against the DMCA over the course of 2017. Stay tuned.